>>If I were to go long, it would be a strict momentum play, as this thing is still way overvalued.
I've been reflecting on this Internet "land-grab" notion that Mary Meeker at Morgan Stanley talks about. She says that the major Internet players are in the process of consolidating their dominant positions through all sorts of exclusive and semiexclusive arrangements, thereby raising the barriers to entry, and, of course, in the process are extending their circulation faster than the native growth of the Internet itself. We all know that Internet usage is still growing unabated, with something like 27% of Americans regularly accessing it already.
I think this is what Yahoo's valuation is all about. We know that advertising revenue at Yahoo has grown considerably, but we know that those revenues alone simply don't justify Yahoo's valuation. Something else is going on here, and the chart seems too powerful and stable to be credited to short-covering panics, or MM manipulation, or other technical factors. It has to be fundamental. This stock has had too many chances lately to break down, and it hasn't.
That got me thinking about the land-grab thing. Every quarter when Yahoo adds 12 million or so daily page views to its inventory, it's adding "land" to its holdings. Even if it's raw land, it's still very valuable territory that someone else doesn't have, and will probably never get. That's worth something. It's seems, too, that the stock's price correlates back to Yahoo's growth in daily page views. Perhaps the market is pricing Yahoo in terms of its size, and adding a premium for Yahoo's leadership position.
I remember back in the early 70's when cable television was the new media theme. Subscriber fees never came close to covering the cost of buildout, and Wall Street didn't value the MSO's on revenues then anyway. The valuation model then was "homes passed", another way of measuring the size of their raw territory in demographic terms. It didn't matter that it was still untapped, it mattered that it was theirs.
Inevitably someone will argue that an exclusive CATV territory is nothing like Internet territory, because the MSO's had exclusive use. Consumers had no choice in those days. That's true enough. I will argue, though, that as this space continues to consolidate into the strongest hands, and the deals therefore get even richer for the leaders, then that franchise becomes as valuable as an exclusive CATV territory. It's the spoils of battle.
Amazon's chart looks weak to me at the moment. The head-and-shoulders could still rule the pattern. If Amazon corrects, it will be the true test of YHOO's strength. Internet contagon. But looking at Yahoo's chart in isolation, it looks awsomely strong to me...and the general market correction is ending. |
